Obama, Boehner outline competing ideas to avert fiscal cliff

Saturday

Nov 10, 2012 at 6:00 AMNov 10, 2012 at 3:22 PM

By Christopher Rowland THE BOSTON GLOBE

President Obama used his first formal appearance since his re-election to call on Congress to immediately make tax cuts permanent for the middle class, declaring on Friday that Tuesday's result was a repudiation of congressional "dysfunction" and proved that Americans want Republicans to compromise.

Whether the wealthy get tax cuts along with the other 98 percent of taxpayers, the president suggested, could be part of broader negotiations to reduce longterm deficits. In the meantime, he said, taxes on the rich should be allowed to increase at the end of the year.

''This was a central question during the election," Obama said in a brief speech at the White House, where he was surrounded by supporters who frequently applauded. "It was debated over and over again, and on Tuesday night we found that a majority of Americans agreed with my approach."

The remarks were the first Obama has made to the public since his victory speech and he used the opportunity to exert maximum pressure on Congress, where the White House appears to be on a collision course with Speaker John Boehner and his House Republicans. The White House said after Obama's remarks that the president would veto any bill that extends tax cuts for families making more than $250,000 a year.

''Our job now is to get a majority in Congress to reflect the will of the American people," Obama declared.

But even as he was laying down his marker, the president expressed a general willingness to compromise and said he was looking forward to meeting with Boehner next week to begin discussions. Boehner's proposal is directly at odds with Obama's, though the speaker also took a conciliatory tone this week.

Obama and Congress must act before the end of the year if they want to avoid the expiration of personal income tax cuts that were put into place during the administration of George W. Bush and then extended by Obama and Congress two years ago. Additionally, payroll tax cuts also are scheduled to expire. Deep spending cuts scheduled as part of a 2011 debt deal also are scheduled to take effect. Taken together, these provisions would result in $500 billion a year being taken out of the economy, pushing it over what is being called the "fiscal cliff." The Congressional Budget Office says the scheduled changes together would be enough to trigger another recession.

Obama's comments indicated he wants to take partial action before the end of the year to avoid tax increases on the vast majority of Americans and the potential economic disruption that would result, while handling separately the more complex tasks of overhauling the tax code, cutting government spending, and reducing the costs of entitlement programs such as Medicare and Social Security.

Earlier Friday the speaker said all of the Bush-era tax cuts -- including those for the rich -- should be extended until next year to provide more time to work out a bigger deal on taxes and spending cuts.

''I'm proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us," Boehner said.

As he did earlier in the week, Boehner indicated that the House is not prepared to accept increases in tax rates.

''We both understand that trying to find a way to avert the fiscal cliff is important to our country," Boehner added, referring to the upcoming negotiations with the White House. But, he added, increasing tax rates for the wealthy "will slow down our ability to create the jobs that everyone says they want."

The Republican speaker said he is open to producing new tax revenues as part of an overall tax-code overhaul that would include rate reductions. But he would not get specific.

''It's clear that there are a lot of special-interest loopholes in the tax code, both corporate and personal," he said. "There are all kinds of deductions, some which make sense, some don't."

Most scenarios circulating in Washington to delay the start of the "fiscal cliff" until next year have included postponing the automatic budget cuts that would be triggered by the current law. But Boehner on Friday would not discuss how the spending cuts -- enacted through something called a budget sequester -- would fit into his call for a delay. Obama also did not discuss specifically how he proposes handling the sequester.

Congress reconvenes Tuesday and the fiscal cliff will be the main topic.

''I hope some of the passions of the campaign are slowly being put behind us so we can begin to move on this," said U.S. Rep. Richard Neal, the D-Springfield who is a member of the House Ways and Means Committee, the panel in charge of writing tax policy. "The peril that awaits of simultaneous tax increases and spending cuts is going to damage an already fragile economy."

Neal said there are not enough so-called tax loopholes and deductions that could be closed to make up for the government's gaping deficits, and argued that tax rates must be raised on the wealthy to make the numbers add up. But he said it is doubtful any meaningful breakthrough will occur before the end of the year.

In the next five weeks, he said, there is time to begin drafting an outline of what needs to be done, perhaps identifying tax loopholes that both sides can agree on closing. He said he expects both sides to show a willingness to compromise.

''It's about legacy now," Neal said of Obama and Boehner. "They understand the perils of not doing anything."

But Boehner leads a House Republican caucus that has demonstrated a willingness to push the country to the brink of economic crisis to oppose debt, deficits, and tax increases. In 2011, House Republicans' refusal to raise the debt ceiling almost resulted in a US credit default. The impasse was broken by the sequester deal, which set up the automatic spending cuts that now loom.

In the Senate, some moderate Republicans, such as retiring Maine Senator Olympia Snowe, say they are pushing for a fix in the lame-duck session of Congress that takes place in the coming weeks before the newly elected lawmakers are sworn in. "This is a very consequential moment," she said.

The White House is hoping that the House will be more sensitive to broader voter opinion and economic conditions in the wake of the election.

Obama argued Friday that acting separately on middle-class tax cuts before they are set to expire in January could quickly and easily eliminate a major portion of the uncertainty around the fiscal cliff.

''If Congress fails to come to an agreement on an overall deficit reduction package by the end of the year, everybody's taxes go up -- including the 98 percent of Americans who make less than $250,000. That doesn't make sense. We shouldn't need long negotiations or drama to solve that part of the problem."